KGI Bank (凱基銀行), a banking unit of China Development Financial Holding Corp (中華開發金控), yesterday said that it would optimize its deposit structure to retain profitability, despite rate cuts by the central bank.
The central bank in March cut its policy rates by 25 basis points, which is expected to reduce KGI’s net interest income by NT$71 million (US$2.36 million) over the next 12 months, China Development Financial chief financial officer Jenny Huang (黃碧玲) told an investors’ conference in Taipei.
KGI’s net interest margin, a critical gauge of profitability that measures the difference between interest income and payment, stood at 1.17 percent at the end of March, up one basis point from a quarter earlier and 17 basis points from a year earlier, Huang said.
The annual pickup came as the bank increased demand deposits by 12 percent year-on-year to NT$132 billion, faster than the 3 percent annual growth of its total deposits to NT$457 billion, while time deposits slid 0.3 percent to NT$325 billion, company data showed.
Its ratio of demand to total deposits in the first quarter rose to 28.8 percent, from 26.5 percent a year earlier, the data showed.
“The rise in demand deposits, which have lower interest rates than time deposits, helped improve net interest margin,” China Development Financial spokesman Richard Chang (張立荃) said, adding that the bank would continue to adjust its deposit structure to offset the effects of the rate cuts.
Net interest income last quarter expanded 14.4 percent annually to NT$1.8 billion, which combined with net fee income of NT$511 million to offset the bank’s investment losses of NT$147 million in the same period, he said.
KGI’s loan book rose 4 percent year-on-year to NT$361 billion at the end of March, company data showed.
It has no plans to increase loan-loss provisions, as it is confident about loan quality, Chang said, adding that its nonperforming loans ratio was 0.17 percent, less than the industry average of 0.24 percent.
China Life Insurance Co (中國人壽), in which China Development Financial holds a 35 percent stake, reported that first-year premiums dove 66 percent annually from NT$47.5 billion to NT$15.9 billion due to stricter regulations and lower investment returns.
However, the life insurer’s net profit in the first quarter increased 59 percent to NT$4.46 billion, remaining the conglomerate’s most profitable unit.
China Development Financial said that it plans to sell its headquarters building in Taipei in the fourth quarter, and relocate China Life and KGI Bank to a new building by the end of this year.
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