Analysts yesterday maintained a conservative outlook on First Financial Holding Co (第一金控), despite better-than-expected first-quarter earnings posted by the state-run company.
First Financial shares rose 0.91 percent to NT$16.65 on the Taiwan Stock Exchange yesterday. They have gained 7.84 percent so far this year.
At an analysts’ meeting on Tuesday, First Financial reported net income in the first quarter rose 7.2 percent annually to NT$4.41 billion (US$135.2 million), with earnings per share of NT$0.39.
The company said its annualized return on assets improved from 0.68 percent in the previous quarter to 0.72 percent, while return on equity dipped from 10.52 percent to 9.28 percent.
First Financial said total outstanding loans expanded in the first quarter, with net interest income continuing to grow at an annual pace of 2.1 percent.
Daiwa Capital Markets analyst Christie Chien (簡民惠) said the increase in net interest income was mainly due to a “time gap” between lending rate and deposit rate adjustments following three central bank interest-rate cuts.
Chien said a 2.1 percent annual increase in mortgages and a 4.7 percent rise in loans to small or medium-sized enterprises in the first quarter also helped offset a 3.1 percent drop in foreign currency, leading to a 1 basis point improvement in net interest.
First Financial’s non-performing loans surged to NT$1.6 billion in the first quarter, nearly doubling from NT$830 million a year earlier. While the non-performing loan ratio for overseas lending last quarter improved to 0.09 percent from 0.24 percent, the delinquency rate for domestic loans jumped to 0.22 percent from 0.17 percent, company data showed.
“Looking forward, we still see risks for asset quality to deteriorate on the back of sluggish economic growth in Taiwan and China, leading to lower loan recoveries this year compared with last year,” Chien said in a note.
CIMB Securities Ltd Taipei-based analyst Nora Hou (侯乃鳳) was more positive over First Financial shares, citing the company’s strong total fees income growth in the first quarter.
During the first three months, fee income rose 19 percent year-on-year to NT$1.9 billion, driven by a 92 percent annual gain in bank assurance fees to NT$588 million, company data showed.
“We see further share price upside given its sustained fee momentum,” Hou wrote in a separate note.
Yuanta Securities Investment Consulting Co (元大投顧) analyst Peggy Shih (施姵帆) said valuation of First Financial shares appear less attractive than its peers, as its projected return on equity performance of 8.5 percent for this year is lower than the industry average of 9.3 percent.
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