MasterLink Securities Corp (元富證券), one of the nation’s leading brokerages, yesterday gave a conservative outlook over earnings this year amid global and local macroeconomic headwinds, despite continued deregulatory efforts by the government.
“While we are positive on the slew of stimulus and deregulatory measures carried out by former Financial Supervisory Commission (FSC) chairman William Tseng (曾銘宗), we are not expecting newly approved service offerings to begin contributing to earnings any time soon,” MasterLink vice president Frank Chang (張清發) told a press conference.
The company is slated to enter the market for short-term financing in the first half of this year after the commission in January lifted restrictions on lending by brokerages, Chang said.
Previously, securities brokerages could only lend money to clients against the value of their stock portfolios if the funds were to be used to purchase stocks or other financial instruments.
The limit has since been lifted, allowing brokerages to provide financing for their clients with no restrictions on how the proceeds are to be used.
Possible uses include purchasing real estate or vehicles, the commission said.
Based on regulatory guidelines capping lending by brokerages at four times their net worth, the nation’s top 10 brokerages alone could add more than NT$1 trillion (US$30.14 billion) worth of loanable funds.
“However, we are still devising internal guidelines for the new lending business and more time will be needed to identify a potential customer base,” Chang said, adding that it took the sector about two decades to see tangible earnings contributions from overseas banking units.
“After all, the loans are extended against equities that might see marked fluctuation in value, while there are no precedents in collection and repossession procedures or whether the company should liquidate borrowers’ stock holdings in the event of a market downturn,” Chang said.
The company reported that net income last year increased 3.94 percent annually to NT$1.56 billion, translating to earnings per share of NT$0.99 during a time when the average trading volume on the TAIEX had shrunk from NT$88.3 billion in 2014 to NT$82.75 billion.
With investors cutting back on trading and many of them trading electronically, Chang said that the company has been encouraging its brokers to diversify their service offerings and expand to selling insurance, wealth management products and even credit cards issued by the banking arm of Shin Kong Financial Holding Co (新光金控), which holds a 25 percent stake in MasterLink.
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