State-run Chang Hwa Commercial Bank (CHB, 彰化銀行) is considering revising down its earnings target for this year after net income plunged 29.23 percent year-on-year to NT$4.25 billion (US$143.94 million) in the first six months.
The results translated into earnings per share of NT$0.41, as economic uncertainty caused by the COVID-19 pandemic and ensuing global interest rate cuts took a toll on the lender’s interest and fee incomes.
“The bank is to strengthen its core operations and diversify its sources of income, while guarding its asset quality,” CHB chairwoman Joanne Ling (凌忠嫄) told an online investors’ conference on Tuesday.
The earnings decline came even though the lender enlarged its loan books by 8.35 percent during the April-to-June period, led by a 10.81 percent gain in retail banking and an 8.05 percent pickup in corporate banking, company data showed.
Overseas lending last quarter shrank 5.65 percent on a yearly basis, which was in line with the lender’s cautious strategy.
The poor showings warrant revisiting the budget to reflect the unfavorable environment, Ling said.
CHB would seek to shore up its business by reaching out to companies moving production lines away from China amid renewed US-China trade tensions, Ling said, adding that capital repatriation and sectors supported by the government’s industrial policy also present business potential.
The government aims to build Taiwan into a regional high-tech hub and has encouraged urban renewal projects to retire old and dilapidated buildings.
The lender’s interest income weakened 16.77 percent in the first half of the year, while fee income dropped 0.38 percent and profit from investment operations soared 20.57 percent, company data showed.
Net interest margin narrowed to 0.87 percent in the first half of the year, and has a slim chance of an upturn going forward, the lender said.
Overall, interest income underpinned the lender’s January-to-June earnings with a 67.13 percent share, followed by investment gains at 15.84 percent and fee income at 15.8 percent, data showed.
However, excessive liquidity around the world creates investment opportunities, and the lender would adjust its portfolio and introduce wealth management products to meet clients’ needs, Ling said.
Asset quality deteriorated last quarter as bad loans rose to NT$6.41 billion as of June, an increase of NT$1.77 billion from three months earlier, the data showed.
CHB officials expect the delinquency rate to climb higher than the current 0.43 percent with the pandemic lingering.
The lender said it recovered NT$7 million of bad loans and might salvage another NT$500 million in the second half of the year.
CHB declined to comment on media reports that Taishin Financial Holding Co (台新金控), its largest shareholder with a 22.5 percent stake, intends to cut its stake by 3 percent to finance its acquisition of Prudential Life Insurance Co of Taiwan (保德信人壽).
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