State-run Hua Nan Financial Holding Co (華南金控) and Taiwan Cooperative Financial Holding Co (合庫金控) are seeking stable profit growth this year by stepping up overseas operations, as well as corporate and retail lending.
The two bank-focused conglomerates are upbeat about expected interest rate hikes by monetary policymakers at home and abroad that might widen interest spreads and profit margins.
Taiwan Cooperative Financial Holding said it expects retail lending to grow modestly this year, especially for urban renewal projects that are not affected by credit controls and unfavorable policy measures.
As of late December last year, mortgage operations at its main subsidiary, Taiwan Cooperative Bank (合庫銀行), totaled NT$586.4 billion (US$20.65 billion), an 8.5 percent increase from a year earlier.
The bank would improve ties with small and medium-sized enterprises, and provide loans to help them expand their operations, it said.
The central bank might raise interest rates by 12.5 or 25 basis points in one or two hikes this year, Taiwan Cooperative Financial Holding said, adding that a rate hike of 25 basis points might drive interest spreads by 5 to 8 basis points.
At the same time, overseas operations might generate greater revenue contributions as nations grow more tolerant of COVID-19 case numbers and ease social distancing requirements, it said.
Net profit at Taiwan Cooperative Financial last year soared 23.65 percent to NT$21.19 billion, above NT$20 billion for the first time, thanks to gains in interest, fee and investment income, it said.
Local shares accounted for 3 percent of overall investment, suggesting ample room to buy on corrections, it said, adding that it intends to increase its stakes in companies that distribute generous dividends.
Hua Nan Financial Holding said that it would increase its outstanding loans by mid-single-digit percentage points this year on top of an 11.3 percent uptick to NT$2.73 trillion at the end of last year.
Syndicated loans, urban renewal projects, wealth management and investment trading would be key growth drivers, it said.
Net interest margin would hold steady at 1.26 percent this year, as interest rate hikes in Taiwan and the US would provide moderate boosts to spreads and margins, it said.
Net income last year almost doubled to a record NT$17.2 billion, with Hua Nan Commercial Bank (華南銀行) accounting for 80 percent and its securities arm reversing a loss a year earlier.
The revenue contribution of overseas operations are expected to improve significantly this year as countries end lockdowns, it added.
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