Taishin Financial Holding Co (台新金控), the nation’s fifth-largest financial service provider, aims to strengthen unsecured lending in the second half of the year because global economic uncertainty might cause corporate loan growth to stagnate, company executives said yesterday.
The group posted NT$5.8 billion (US$200.55 million) in net profit for the first six months, rising 47.7 percent from last year, driven by growing interest and fee revenues, as well as strong bad loan recoveries, the company’s report said.
“We expect the trend to continue, but at a milder pace for the rest of the year because of a high base and increasing global economic uncertainty,” Taishin chief financial officer Welch Lin (林維俊) told an investors conference.
As of June 30, total loans at Taishin International Bank (台新銀行), the group’s flagship unit, equaled NT$601 billion, up 13.8 percent from the same period last year, while corporate lending increased 28.3 percent to NT$270 billion, the report said.
The manufacturing sector made up 50.6 percent of the lender’s corporate credit, with DRAM and flat-panel makers accounting for 2.1 percent and 6.4 percent respectively, the report showed.
Taishin Bank has set aside a 100 percent loan loss reserve as part of a syndicated loan to cash-strapped ProMOS Technologies Inc (茂德科技), now that a default appears inevitable later this year, Taishin Bank president Justin Tsai (蔡榮棟) said.
The loss-making computer memory chipmaker owes NT$58 billion to scores of state-run and private banks.
“We’re pessimistic about the bailout effort, given its complexity and the sector’s bleak outlook,” Tsai said. “A default may be unavoidable in September.”
That would lift the bank’s nonperforming loan ratio to 0.31 percent, from the current 0.2 percent, and trim its coverage ratio to 330 percent, from a record-high 531 percent, Tsai said.
Tsai expects corporate lending to stay flat in the second half because sluggish economic growth in the US and Europe is bound to affect domestic manufacturers, Tsai said.
To buffer the slowdown, the bank intends to assign more importance to unsecured lending, boosting the segment’s revenue to NT$45 billion toward the end of the year, from a stagnant NT$4.3 billion as of June 30, Taishin Bank chief retail banking officer Spike Wu (吳清文) said.
“We expect to see healthy growth in unsecured lending in the second half and beyond after the introduction of a sophisticated credit-screening mechanism,” Wu said.
Oliver Shang (尚瑞強), another retail banking executive, said unsecured consumer loans would become the next battleground after lending to small and medium firms because both render higher interest yields than loans to large corporations.
Taishin Bank, the nation’s third-largest credit card issuer, saw its number of customers grow 11 percent to 37,629 over the past six months, but credit card fees fell 21.1 percent to NT$338 million, because of a conservative business strategy and accounting rule changes, Wu said.
The lender expects the net interest margin to remain unchanged at 1.45 percent for the rest of this year, from 1.48 percent in the first quarter, as a bumpy global economic outlook sharpens competition, with the market flush with liquidity, Wu said.
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