Taiwan’s financial institutions, which have mostly recovered from the global financial crisis in the first half, may further improve their earnings ability for the rest of this year and beyond on reviving business activity and expansion into the Chinese market.
With the exception of Shin Kong Financial Holding Co (新光金控), all domestic financial service providers swung to profits at the end of July thanks to increasing fee incomes, a growth in loans and the bottoming out of net interest margin.
Cathay Financial Holding Co (國泰金控), the nation’s largest by assets, posted an after-tax income of NT$463.9 million (US$14.49 million) as of July 31, reversing a net loss of NT$1 billion for the first half, the company’s data showed.
Fubon Financial Holding Co (富邦金控), Taiwan’s second-largest, but most profitable financial service provider, reported NT$15.21 billion as of July 31, rising 34.91 percent from the same period last year.
After-tax profit for Chinatrust Financial Holding Co (中信金控), the third-largest, reached NT$8.85 billion for the first seven months, or NT$0.89 earnings per share.
All saw sharp increases in fee incomes attributable to wealth management product sales and expect their net interest margin to widen following the unexpected interest rate hike in June.
For Taipei Fubon Bank (台北富邦銀行), the banking arm of Fubon Financial, net fee incomes jumped 26.63 percent year-on-year to NT$1.78 billion in the first half, from a year earlier.
Cathay United Bank (國泰世華銀行), the banking unit of Cathay Financial, reported a 41.9 percent gain in fee incomes at NT$3.66 billion for the first six months, from NT$2.58 billion a year earlier.
Wealth management product sales contributed 65.5 percent and 38.52 percent to Fubon Financial and Cathay Financial respectively, according to their financial reports.
Ken Shih (施耕宇), a financial analyst at Primasia Securities Co, said in a note that the banking sector may demonstrate further earnings turnaround for the rest of the year, given its well-maintained asset quality and favorable macro-economic environment.
The non-performing loans for the nation’s 37 lenders dropped to a record low of 0.87 percent of their total loan at the end of July, while the coverage ratio — loans covered by provisions — stood at 118.98 percent, the Financial Supervisory Commission’s (FSC) statistics said.
Shih said the rate hike in June is only the beginning of an up-cycle that may go on for several years.
Fubon Financial president Victor Kong (龔天行) and his Chinatrust Financial peer Daniel Wu (吳一揆) predicted last month the central bank would raise the discount rate by 12.5 basis points again later this month.
Additionally, Shih said Taiwanese banks would benefit from closer trade ties with China, adding that signing the Economic Cooperative Framework Agreement (ECFA) was only the beginning of a series of moves to liberalize policies in the years to come.
Local financial firms have pressed the FSC to further loosen cross-strait banking rules so they can better compete with their foreign rivals in the Chinese market.
“We believe the next round of cross-strait talks will focus on relaxing investment restrictions,” Shih said.
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