Fri, Nov 04, 2011 page12

• Chinatrust Q3 earnings surge over 31 percent

  BUILDING FOR THE FUTURE: Chinatrust plans to establish a venture capital fund and a financial leasing company in China, as it focuses on expanding its business there

  • By Crystal Hsu / STAFF REPORTER
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  Chinatrust Financial Holding Co (中信金控), Taiwan’s third-largest financial services provider, expects earnings to hit a new high in the current quarter, as a result of growing interest income and lower provision, senior executives said yesterday.

  However, the group remains cautious about the business outlook next year over concerns of softening demand for corporate loans and wealth management services if the EU fails to find a lasting solution to the sovereign debt crisis.

  “We expect profitability to climb further in the fourth quarter after establishing a record in the first nine months,” Chinatrust Financial president Daniel Wu (吳一揆) said as he briefed the media on its third quarter earnings.

  Chinatrust Financial reported NT$3.37 billion (US$111.52 million) in net profit from July to September, an increase of 8.88 percent from the previous year, with improved consumer spending boosting core businesses at -Chinatrust Commercial Bank (中信銀), the group’s main source of income, Wu said.

  Net income increased 31.8 percent year-on-year to reach NT$14.52 billion for the first nine months of the year, or earnings of NT$1.29 per share, company data showed.

  Wu said he was confident the figures would improve even further in the coming months, thanks to sustained loan demand from Taiwanese firms in China, where borrowing costs are much higher due to credit tightening.

  Wu declined to speculated about performance over the longer term, saying much depended on how Europe’s debt problem was dealt with.

  “The longer the drama lasts, the bigger the blow to the global economy and consumer confidence will be,” Wu said.

  Chinatrust Commercial, the nation’s largest credit card issuer, saw its mutual fund sales fall 20 percent last month, Wu said.

  The unease could also undermine corporate banking and the wealth management businesses, key growth drivers for the bank this year, he said.

  Wealth management generated NT$2.5 billion in fee income in the third quarter, while corporate lending contributed NT$838 million, according to company data.

  After completing the acquisition of MetLife Taiwan Insurance Co (大都會人壽) on Tuesday, Chinatrust Financial plans to rename the company Chinatrust Life Insurance Co (中國信託人壽) early next year.

  The new subsidiary will be able to utilize the bank’s sales channels and telemarketing to sell insurance products, Wu said, adding that the insurer does not have any exposure to European sovereign debt.

  The banking arm appears to have no more write-off this year after setting aside 74 percent of a NT$3.7 billion loan as of last month relating to troubled ProMOS Technologies Inc (茂德科技) with collateral worth 25 percent, the bank’s senior vice president, Rachael Kao (高麗雪), said.

  The lender, which has a loan-loss reserve of 1.03 percent, would not see its earnings diluted if the Financial Supervisory Commission raised the statutory requirement to 1 percent, from the current 0.5 percent, Kao said.

  “Not having to make such provisions boosts our confidence in achieving better earnings this year,” she said.

  Kao expects the firm’s net interest margin to widen to 1.6 percent toward the end of the year, from 1.58 percent in late September, driven by larger loan volume, even though the central bank is expected to keep interest rates low for some time yet.

  With just US$24 million in corporate bonds and loans to firms in Italy and Spain, Chinatrust Commercial is not worried about asset deterioration, Kao said.

  The group’s bad loan ratio stood at 0.71 percent as of September and the coverage ratio at 166.62 percent, company statistics showed.

  Meanwhile, the company plans to establish a venture capital fund and a financial leasing company in China, as it seeks to expand its businesses in the Chinese market, Wu said.

  The venture capital fund would invest in Taiwanese companies operating in China and expected its Shanghai-based leasing firm to be open for business next year, he added.
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