Taipei Times (TT): How did King’s Town Bank (京城銀行) fare in the first half of the year?
Terence Tai (戴誠志): The bank posted NT$1.54 billion [US$51.46 million] in net income for the first half, an increase of 19.6 percent from the same period last year on the back of growing income from interest. The figures represent earnings of NT$1.47 per share, nearly 20 percent higher than the EPS of NT$1.23 a year earlier.
With a strong service network in southern Taiwan, the bank is blessed with high customer loyalty. Many refuse to switch to other lenders that offer lower borrowing costs.
The bank’s net worth equals NT$17.3 per share as of June, compared with NT$14.4 per share a year earlier. Now that the company’s net worth has exceeded NT$15 per share, we are considering distributing dividend payout next year (as promised). The payout will likely be in stock dividends as the Financial Supervisory Commission urges banks to retain cash and use it to strengthen liquidity, in line with stricter global accounting regulations.
TT: What is your opinion on the bank’s earnings outlook for the rest of the year and beyond?
Tai: Everything will likely be stable and flat [interest and fee incomes, operating expenses and credit costs]. We aim to keep the loan-to-deposit ratio at around 70 percent from 69.4 percent in June. We do not seek loan growth, but will keep focusing on risk management and internal control. We believe that is enough.
Risk management has been my priority since I assumed the chairmanship more than four years ago. King’s Town will not take steps to push or promote loan growth because doing so will drive up risks as well. However, if customers want to borrow more, we will try to meet their demand.
The central bank’s new credit control has no impact on King’s Town. Few houses qualify as luxury homes — priced at NT$80 million in Greater Taipei and NT$50 million elsewhere — in areas we serve.
TT: What are your views on the economy since the government forecast a hefty bounce in the second half despite zero growth?
Tai: In my view, the economic state in the next 18 months will likely be the same as the past 18 months — with Europe’s debt crisis likely to depress external demand for a while.
Since the fall of the Iron Curtain 20 years ago, labor markets worldwide have seen an influx of cheap labor from eastern Europe, Russia, India and China. This trend inevitably constrains wage growth. The absence of wage increases in turn limits growth in consumer spending. This backdrop renders rapid or drastic wage improvement an uphill struggle.
Nevertheless, I hope President Ma Ying-jeou (馬英九) can fulfill his “Next Golden Decade” project to lift the standard of living for all and bring prosperity to industrial and service sectors. As the old saying goes: There can be no unbroken eggs under a toppled nest.
TT: Would you comment on media reports of plans by Cathay Financial Holding Co (國泰金控) to acquire King’s Town Bank?
Tai: The reports are inaccurate. We have not received any offer and have no plans to sell. Our mission is simple: providing a convenient and safe platform for customers to make deposits and take out loans while providing employees with a stable work environment. We will keep working toward that goal.
We will not rule out the possibility of expanding the bank’s scale of economies if opportunities arise. We will seize them to strengthen services to customers and advance the benefits of our shareholders and employees.
TT: Many local lenders are seeking expansions in China and other places to cope with overbanking in Taiwan. Will King’s Town join the bandwagon?
Tai: We are content with the “status quo” and do not see the need to expand across the Taiwan Strait or anywhere else. We feel more at ease doing business here. Currently, the bank has 63 branches, mostly in Yunlin and Chiayi counties as well as Greater Tainan.
King’s Town aims to be a community bank with a focus on retail banking businesses. Other peers position themselves as commercial lenders and endeavor to strengthen their footholds in Taiwan while expanding in China and worldwide.
Our philosophy is simple: Since King’s Town is not even a major player here, it will do better to avoid competition in China or elsewhere until the time is right.
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